The business practices of Amazon Web Services (AWS), Google Cloud, and Microsoft Azure, the three largest public cloud infrastructure providers, have recently come under the scrutiny of federal authorities. All the attention is primarily due to their dominance in the global cloud infrastructure services market. According to a report by Synergy Research Group, these three hyperscalers own two-thirds of the market and account for nearly three-quarters of spending on public cloud services. The Federal Trade Commission (FTC) would like to understand the impact of this dominance and has issued a request for information from the public.
The Federal Trade Commission has entered the chat
The FTC has raised concerns about the competitive practices among the big three and their ability to provide secure storage for customer data. The FTC is seeking comments on several issues related to cloud services, such as the ability of cloud customers to negotiate with cloud service providers (CSPs), practices that incentivize customers to stick with a single cloud provider, and the use of AI and other proprietary technologies in cloud services. The agency is particularly concerned about the potential for anti-competitive behavior among cloud providers and the impact this could have on customers.
The FTC’s announcement comes just a few months after the US Department of the Treasury released a report on cloud banking that raised similar concerns about consolidation and security in the cloud industry. The report called for greater transparency and accountability from cloud providers, as well as more robust security measures to protect customer data.
FTC scrutiny could mean good news for customers
It is crucial that cloud customers can negotiate fair and transparent contracts with CSPs that provide clear terms and conditions for the use of cloud services. They should also be able to easily migrate their data and applications between different cloud providers without fear of being locked into a single provider. Moreover, the use of AI and other proprietary technologies in cloud services must be transparent, and customers should have the right to audit these technologies to ensure that their data is being handled securely and responsibly.
Scrutiny from the Federal Trade Commission (FTC) can positively impact cloud services by promoting transparency, security, and fair competition in the industry. This could be welcome news for cloud customers mired in complexity and cloud costs spiraling out of control. So what might we see following the inquiry? A few different benefits:
- Increased transparency: FTC scrutiny can encourage cloud service providers to be more transparent about their data collection and usage practices. Transparency empowers users to better understand how their data is being used and can help build trust between users and service providers.
- A comprehensive approach to cybersecurity: Scrutiny from the FTC can lead to improved security measures in cloud services. By holding service providers accountable for data breaches and other security issues, the FTC can incentivize providers to implement stronger security protocols and ensure that user data is protected.
- Improved services and pricing: The FTC could help foster fair competition in the cloud services industry by enforcing antitrust laws and preventing monopolies. This can encourage innovation and drive down prices for consumers while also promoting a healthy and diverse market.
In addition to concerns about consolidation and security, the FTC is also focusing on the role of cloud providers in promoting innovation and competition in the technology industry. Cloud providers must work closely with regulators and customers to ensure that their practices are fair, transparent, and in line with the needs of the market. By promoting competition and innovation, cloud providers can continue their history of rapid innovation and drive prosperity in the technology industry while also providing customers with the secure and reliable cloud services they need to succeed.
Increased scrutiny could lead to temporary setbacks for cloud customers
There are potential—albeit temporary— downsides to this attention that customers should consider. Cloud customers should create a plan to address these potential operational hiccups:
- Service disruptions and unplanned downtime: Attention directed at a cloud service provider (CSP) could potentially disrupt access to the cloud services companies rely on. For example, if a CSP is found to be engaging in unfair or deceptive practices, the FTC could take legal action against them, which could result in restructuring or even the shutdown of the service.
- Additional security burdens: If the FTC investigates a CSP, it could uncover security vulnerabilities or other issues that could put consumer data at risk. Since cloud security operates on a shared model of cybersecurity, a cloud customer might face an overwhelming number of decisions to protect data—whether increasing cybersecurity at an extra cost or switching providers altogether.
- Unpredictable costs in the short term: Another concern for consumers could be the possibility of increased costs. If the FTC finds that a CSP has engaged in anti-competitive practices, it could impose fines or other penalties, which the CSP could ultimately pass back to consumers in the form of higher prices. Competition is good for pricing in the long run, but companies need a clear plan for managing pricing unpredictability in the short term.
The cloud industry is rapidly evolving, and cloud providers must be careful not to stifle competition by using their dominant position in the market to unfairly advantage themselves over smaller competitors. By working with regulators to ensure that their practices are fair and transparent, cloud providers can help promote competition and innovation in the technology industry, driving growth and prosperity for all.
Elizabeth Wallace is a Nashville-based freelance writer with a soft spot for data science and AI and a background in linguistics. She spent 13 years teaching language in higher ed and now helps startups and other organizations explain – clearly – what it is they do.